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Technology Business Research Cloud Portfolio CLOUD BUSINESS QUARTERLY SM Discussion Document Spring 2012 TBR T E C H N O L O G Y B U S IN E SS R E SE A R C H , IN C.

TBR's 4Q11 Public Cloud Market Landscape

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Page 1: TBR's 4Q11 Public Cloud Market Landscape

Technology Business Research Cloud Portfolio

CLOUD BUSINESS QUARTERLYSM

Discussion DocumentSpring 2012

TBR

TECHNOLOGY BUSINESS RESEARCH, INC.

Page 2: TBR's 4Q11 Public Cloud Market Landscape

TBR

Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.2

Executive Summary4 Technology Business Research (TBR) Cloud Research Overview5 TBR’s Cloud Research Products

TBR’s Public Cloud Market Landscape7 TBR Public Cloud Market Landscape Overview10 TBR Public Cloud Market Landscape Examples

TBR’s Cloud Vendor Reports17 Vendor Report Overview19 Salesforce.com Examples21 Google Cloud Examples23 Microsoft Cloud Examples

TBR’s Cloud Computing Adoption Study26 Table of Contents28 Methodology29 Cloud Computing Adoption Study Examples

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.3

Executive Summary:TBR’s Cloud Services Practice

Executive Summary: TBR’s Cloud Services Practice

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.4

TBR evaluates cloud from all angles to give customers recommendations and actionable insights to drive customer adoption

Workloads

Public Cloud

Private/ Hybrid

Cloud

Partner Ecosystem

Purchasing Trends

Competitive

Landscape

Cloud Practice

Executive Summary: TBR’s Cloud Services Practice

TBR Cloud Services Topical Research Areas

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.5

TBR’s cloud portfolio provides insights into to public and private cloud vendor business models, trends, and adoption behaviors

Executive Summary: TBR’s Cloud Services Practice

TBR Cloud Services Research Products

Public Cloud Market Landscape

Cloud Vendor Reports

Vendor Reports

Public Cloud Adoption Studies

Private/Hybrid Cloud Purchasing Studies

Purchasing

Studies

What and why are customers buying?• SaaS, PaaS, IaaS,

SECaaS Adoption• Purchase scenarios• Buying criteria• Customer Satisfaction

Who is winning in public cloud?• 35+ cloud vendors• Total cloud market

sizing• Key trends and

scenarios• Segments and

Region breakouts

Who is buying private/hybrid clouds and how?• Purchasing scenarios• Buying criteria• Roles and

relationships• Customer Satisfaction

How do cloud leaders build their business? • Cloud Strategy

(Public, Private and Services Portfolio)

• Revenue and Profitability

• GTM, Resource Management and Sales Tactics

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.6

TBR’s Public Cloud Market Landscape and Example Slides

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.7

With the quarterly Public Cloud Market Landscape Reports, TBR will deliver research focused on performance by segment and geography empowering clients to focus offerings and routes to market in support of companies that deliver the most value, and thus profit.

Public Cloud Business Models are Maturing• Those vendors that succeed in elevating customer

usage of public cloud offerings to a strategic level will own both customer loyalty and “share-of-wallet” in the cloud for the foreseeable future.

• Organizations adopting public clouds and related services seek what all buyers of IT want – clear ROI, minimal disruption and security risks, and simple implementation.

• “Trusted partners” to those end-users will utilize comprehensive product portfolios that transition customers from ad hoc, early stage individual offering purchases to strategic corporate-level purchasing.

Key Areas of Focus:• How are leading and emerging cloud vendors

performing across segments and workloads?• What business models and vendor strategies are

succeeding in revenue growth?• What are key trends in the vendor landscape?• Segments:

• Software-as-a-Service (SaaS)• Platform-as-a-Service (PaaS)• Infrastructure-as-a-Service (IaaS)

• Revenue and growth analysis overall and by segment:

• Public cloud revenue• % change• Absolute change (revenue)

• Geographic Analysis• Key Alliances and Acquisitions

TBR Public Cloud Market Landscape Research Objective

Cloud computing is a viable business model, driving growth within traditional hardware, software, telco and services businesses

TBR’s Public Cloud Market Landscape

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.8

TBR’s research targets key public cloud deployment scenarios to determine the drivers of customer adoption and innovative vendors

Amazon AWSAT&TBMCCA TechnologiesCiscoCitrixGoGridGoogleHPIBMInformaticaIntuitMicrosoftTWC (Navisite)NetSuiteDimension Data (OpSource)OracleRackspaceRedhat

Salesforce.comSAP AGCenturyLink (Savvis)SymantecVerizon + TerremarkVMwareWiproZohoBoxDellEnomalyWorkdayServiceNowFujitsuEMCCSCJoyentEquinix

SaaS

IaaS

PaaS

TBR Public Cloud Market Landscape: 37 Covered Vendors

TBR’s Public Cloud Market Landscape

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TBR’s Public Cloud Market Landscape provides actionable insight based on vendor activity, competitive benchmarks and scenario analysis

Executive SummaryTBR Position Growth & Revenue LeadersKey Findings and Trends Geographic OverviewSegment View Key Alliances & Acquisitions

Scenario Discussion:Infrastructure-as-a-ServiceGrowth & Revenue LeadersScenario AnalysisResource ManagementKey Alliances & Acquisitions

Scenario Discussion:Software-as-a-ServiceGrowth & Revenue LeadersScenario AnalysisResource ManagementKey Alliances & Acquisitions

Scenario Discussion:Platform-as-a-ServiceGrowth & Revenue LeadersScenario AnalysisResource ManagementKey Alliances & Acquisitions

Geographic DiscussionAmericas, EMEA, APAC

The TBR Public Cloud Market Landscape Includes:

TBR’s Public Cloud Market Landscape

Page 10: TBR's 4Q11 Public Cloud Market Landscape

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TECHNOLOGY BUSINESS RESEARCH, INC.

Public Cloud Market Landscape

CLOUD BUSINESS QUARTERLYSM

Publish Date: Jan. 17, 2012

Third Calendar Quarter 2011

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.11

Customer cloud spending increased across verticals and geographies, despite economic concerns, and TBR projects 23% growth through 2012

SOURCE: COMPANY DATA; TBR ESTIMATES

$2.41 $2.68 $3.07 $3.17 $3.19 $3.81 $4.14

$9.88$12.86

$18.10

$5.98 $6.44 $7.26 $7.92 $8.58 $9.24 $10.31

$23.00

$33.00

$43.00

$-

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$45

3Q10 4Q10 1Q11 2Q11 3Q11 Fst 4Q11 Est 1Q12 2010 Est. 2011 Est. 2012

Estimated Public Cloud RevenueAggregated TBR Public Cloud Landscape Revenue and Growth

TBR Public Cloud Market Covered in the Cloud Market Landscape Report TBR Public Cloud Market Estimate

Estim

ated

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loud

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nue

(in $

Bill

ions

)

Calendar Quarter

TBR

Estim

ated

Pub

lic C

loud

Reve

nue

(in $

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ions

)

TBR

42% year-to-year quarterly growth

CAGR: 23%

Calendar Quarter Calendar Year

TBR’s Public Cloud Market Landscape covers 35 vendors.

The 3Q11 Public Cloud Market Landscape includes revised revenue total for the covered vendors going back to 1Q10 based on both additional insights and net new vendors covered. Vendors added in 3Q11 include CenturyLink, Dimension Data, EMC, Equinix, and Fujitsu.

Total Public Cloud Market

Public Cloud Market Revenue in TBR’s covered vendors

TBR’s Public Cloud Market Landscape

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$0

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$1,500

$2,000

$2,500

$3,000

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2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 Fst 4Q11

EquinixEMCFujitsuServiceNowWorkdayEnomalyDellBoxZohoWiproVMwareVerizon + TerremarkSymantecCenturyLink (Savvis)SAP AGSalesforce.comRedhatRackspaceOracleDimension Data (OpSource)NetSuiteTWC (Navisite)MicrosoftIntuitInformaticaIBMHPGoogleGoGridCitrixCiscoCA TechnologiesBMCAT&TAmazon AWS

Estimated TBR Public Cloud Market Landscape Vendor and Aggregated Segment Revenue Totals

Esti

mat

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Clo

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even

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n $

thou

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s)

Calendar Quarter

TBR

At just over half of TBR’s total covered public cloud market revenue, Intuit, Microsoft, and Salesforce.com show the potential for cloud run rates

Intuit

Salesforce.com

Microsoft

TBR covers 35 companies across all public cloud segments and geographies

SOURCE: COMPANY DATA; TBR ESTIMATES

TBR’s Public Cloud Market Landscape

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.13

Symantec

Citrix

Microsoft

Salesforce

Intuit

AT&T

HP

Google

NetSuite

Rackspace

Amazon AWSIBM

Redhat

Verizon + Terremark

VMware

BMC

InformaticaCisco

CenturyLink (Savvis)

Zoho

CA Technologies

SAPTWC (Navisite)

Oracle

Dimension Data (OpSource)

Box

Dell*

Enomaly Workday

ServiceNow

FujitsuEMC

GoGrid

Wipro

-10%

10%

30%

50%

70%

90%

110%

130%

-10% 10% 30% 50% 70% 90% 110%

Year

-to-

year

Pub

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loud

Rev

enue

Gro

wth

Year-to-year Corporate Revenue Growth

3Q11 Estimated Public Cloud Revenue Growth vs. Corporate Revenue Growth TBR

Key:Weighted Unweighted

The public cloud “gold rush” continues, driving ongoing pure-play double-digit growth and cross-industry new entrants

Traditional vendor offering public cloud through acquisitions and R&D are still small, but are experiencing rapid growth in the segment.

Pure play public cloud vendors continue to experience high, double-digit growth as customers across business segments increasingly adopt public cloud solutions and incorporate them into core operations.

Early public cloud vendors AWS and Salesforce.com sustain their size and growth through expanded offerings.

*TBR does not recognize public cloud revenue from Dell prior to 1Q11.

Hosting and telecom providers are accelerating public cloud entry, building a cohort within TBR’s public cloud benchmarked vendors.

SOURCE: COMPANY DATA; TBR ESTIMATES

TBR’s Public Cloud Market Landscape

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Vendors with public SaaS as a significant part of their portfolios are experiencing the most rapid overall growth

• Pure-play SaaS vendors such as Box, Workday and ServiceNow continue to lead in both cloud and corporate revenue growth as demand for point solutions continues to increase.

• More experienced cloud and traditional virtualization vendors, such as VMware, Google and Salesforce.com, experienced comparable public cloud and corporate growth patterns as rapidly growing public SaaS solutions comprise larger portions of their overall revenue than competitors.

Weighted Average

Absolute Average

Key

Pure-play vendors

Intuit

CiscoCitrix

HP

Informatica

Microsoft

TWC (Navisite)

Oracle

Salesforce.com

SAP

Symantec

Zoho

ServiceNow

Dell

Fujitsu

Google

BMCIBM

VMware

CA Technologies Box

Workday

0%

20%

40%

60%

80%

100%

120%

140%

-10% 10% 30% 50% 70% 90% 110%

Year

-to-

year

Pub

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loud

Saa

S Re

venu

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row

th (%

)

Year-to-year Corporate Revenue Growth (%)

Corporate Revenue Growth vs. Estimated Public Cloud SaaS Revenue Growth

TBR

SOURCE: COMPANY DATA; TBR ESTIMATES

TBR’s Public Cloud Market Landscape

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.15

Public cloud vendors are beginning to address the European security conundrum by building datacenters in the regionEMEA 3Q11 Summary

TBR’s estimated public cloud market across covered vendors in EMEA revenue increased 46% year-to-year.

Key Insights Vendor Activities• Although many vendors are

looking to expand into EMEA with their public cloud portfolios, security remains a large concern for the EU, and regulations are hindering adoption in the region.

• European cloud vendors are building datacenters across Europe to keep data local – addressing customer concerns about cloud security and accelerating adoption.

• South Africa is a growing customer of public cloud computing, as the country is more economically stable and technologically advanced than its neighbors. The nation has recently joined Brazil, Russia, India and China in the economic block known as BRICs.

• Despite EU security concerns, many vendors are establishing a physical presence in EMEA, launching many new datacenters.

• In 3Q11 Amazon launched a datacenter in Stockholm, Google launched a datacenter in Dublin, and Salesforce.com announced plans to build a datacenter in London in 2012.

• In an announced partnership with Capgemini, Microsoft will gain a new outlet to deploy its Azure platform in EMEA, with plans to expand into an additional 22 countries.

• Rackspace launched its European cloud initiative in early 2011 and is expanding its presence in the region.

SOURCE: COMPANY DATA; TBR ESTIMATES

TBR’s Public Cloud Market Landscape

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.16

TBR’s Cloud Vendor Reports and Examples

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.17

TBR’s cloud reports cover all aspects of vendors’ cloud strategies to enable subscribers to better understand and compete in the market

TBR’s Cloud Vendor Reports

Cloud Business Quarters Reports and Report Structure:1Q/3Q ReportsIBM CloudAmazon AWSServiceNowVerizon + TerremarkRackspace2Q/4Q ReportsGoogle CloudSalesforce.comMicrosoft CloudOracle Cloud

Initial Response: 5-7 pages Report: 15-20 pages

Timing: Within 48 hours of companies’ earnings announcementsIncludes: • TBR Position• SWOT Analysis• Financial Model Assessment• Go-To-Market Strategy• Resource Management

Strategy

Timing: Within 20 business days of companies’ earnings announcementsIncludes: • TBR Position• Strategic Outlook and Overview• SWOT Analysis• Scenario Discussion• Financial Model Assessment• Segment and Landscape Analysis• Go-To-Market Strategy• Sales Discussion• Resource Management Strategy• Geographic Analysis• Alliances, Acquisition, and

Portfolio Discussions

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TECHNOLOGY BUSINESS RESEARCH, INC.

Highlights from Recent TBR Cloud Business Quarterly Deliverables

CLOUD BUSINESS QUARTERLYSM

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.19

Salesforce.com is expanding its customer base and diving into the social enterprise, but expenses will continue to outweigh revenue in 2012TBR Position Company ObjectivesSalesforce.com’s bet that volume will outweigh expenses is a good strategy to increase market share, but the company is not making up enough ground in volume to sustain profitability. TBR believes the company will not slow its growth rate – or turn a profit – until 2013.In 4Q11, Salesforce.com achieved stellar year-to-year growth of 38% to $632 million, but reported an operating loss of $6 million. An operating loss for a fifth consecutive quarter begs the question: How far will Salesforce.com go to sustain such high growth? With year-to-year quarterly growth averaging 37% across 2011, and a $3 billion 2012 run rate target, TBR believes Salesforce.com will sustain high growth but at the cost of profitability. Sales and marketing expense growth dramatically outpaces customer growth, at 41% and 9%, respectively, indicating churn and increased deal sizes (primarily due to larger deals). As Salesforce.com ramps up social enterprise solutions, it will continue increasing sales and marketing expenses to gain market share.

Scale customer base to gain market share and enable increased cross- and upselling

Salesforce.com is among the largest SaaS vendors and constantly seeks added scale. The company will focus on growth over profit as it builds a stable base to upsell and cross-sell, betting that volume will outweigh expenses in coming years.

Differentiate and add value to solutions to retain customers and increase share of wallet

As SAP, Oracle and Microsoft enter the cloud market, Salesforce.com differentiates its solutions with CRM and SFA to add a “social” layer. In 2012, it will increasingly expand into the social enterprise. Although Salesforce.com has historically focused on growing one product at a time, as it did with CRM, Force.com and Chatter, TBR believes the launch of the social enterprise product family will be successful but expensive due to acquisition and integration costs along with increased sales headcount and training.

Gain early-to-market success in the social enterpriseSalesforce.com caters to customers’ social interest by spearheading the social enterprise trend along with Google, Microsoft and Zoho. The risk is that social enterprise capabilities are sold at lower price points than traditional enterprise solutions, making volume the key to success.In 4Q11, Salesforce.com generated 40% of new business outside of CRM, signifying success in other areas, such as ServiceCloud and Radian6.

Salesforce.com: TBR’s Cloud Vendor Reports

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.20

29.0%

33.8%

38.4%

36.2%

38.3%

31.5%

26.9%

36.8%

21.7%

-10%

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4Q10 1Q11 2Q11 3Q11 4Q11 1Q12Est.

2010 2011 2012Est.

Net

Rev

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, In

$ Th

ousa

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SALESFORCE.COM NET REVENUE, GROWTH, OPERATING MARGIN AND PROJECTIONS

Revenue Revenue Growth Year-to-year Operating MarginNOTE: Annual revenue and projections are for calendar 2010-2012, respectively.SOURCE: SALESFORCE.COM AND TBR

TBR

Net

Rev

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Gro

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TBR Assessment of Salesforce.com’s two-year strategic outlook

Key TakeawaysFinancial: Salesforce.com’s fifth consecutive quarter of unprofitability indicates its lack of a sustainable profitability expansion strategy; however, the company’s growth strategy has been successful, evidenced by record revenue growth in 4Q11.Go to Market: In 2011, Salesforce.com focused on selling into new verticals, such as the public sector. In 2012, the company will expand its portfolio to increase share of wallet and will attract new customers looking to leverage cloud benefits.Resource: Salesforce.com is investing to rapidly expand into the public SaaS and PaaS markets before it is saturated by vendors such as Microsoft, Oracle, SAP and Zoho.

Strategic Outlook• Salesforce.com leveraged a disruptive

technology, SaaS, to differentiate itself and enter the market, and its success fueled competition. Expanding outside of its core CRM market and continuing to differentiate its portfolio are essential to long-term growth and success against competitors.

• Salesforce.com will continue to see high revenue growth in 2012 as its social enterprise portfolio gains traction and solutions continue to launch.

• Expanding into the social enterprise enables Salesforce.com to increase share of wallet by offering solutions to its large and existing customer base. The company’s social enterprise has expanded from CRM into marketing, social media, social networking, human capital management, services and support, sales and finance and will it continue moving further into the back office.

• TBR believes the company will focus on its recently released products through 2012 and will look to further penetrate the back-office market, namely in human capital management, finance and supply chain, in 2013.

A focus on customer and portfolio expansion, rather than profitability, will increase Saleforce.com’s share in the crowding cloud market

Dashed line represents operating at breakeven

Salesforce.com: TBR’s Cloud Vendor Reports

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.21

TBR Assessment Cloud Business Strategic ObjectivesGoogle Apps grew an estimated 25% year-to-year in 4Q11, and will continue to accelerate adoption in the cloud-based productivity space; however, even with high adoption rates compared to peers, the company is barely monetizing its Apps portfolio.Google is marketing its cloud business as the “social enterprise,” spurred by the dramatic shift from static desktop applications to social and collaborative cloud-based productivity suites. Similar to Chatter launching Salesforce.com into the social enterprise space, Google is promoting its cloud business (Google Apps, Google App Engine and Google+) not only as cost-effective but also as more mobile, social and collaborative than Microsoft Office365 and IBM Lotus Notes.

Drive competition in the productivity space, particularly with Microsoft Office365, for customers seeking cloud-based, collaborative solutions and embracing the social enterprise

In TBR’s Winter Cloud Adoption Study, Google Apps’ 28% adoption rate was higher than Microsoft Office365’s rate of 24%. TBR estimates Google Apps is growing 25% year-to-year and believes that as businesses move toward the social enterprise, adoption and revenue growth will increase.

Google is shuttering unsuccessful products to refocus resources on core areas of mobile, social and the cloud

Google CEO Larry Page announced the shutdown of 12 products during the 4Q11 earnings call, but product teams will remain intact to focus on more successful and growing areas, such as Google Apps, Android and Google+.Although Apps represents a small portion (under 1%) of Google’s overall revenue, TBR believes the company will focus more resources on its Apps portfolio in 2012 to drive increased sales, retain customers and edge out a large, growing list of competitors. As an early-to-market cloud vendor, Google has had the luxury of scaling its customer base with little competition; however, those days are long gone. Customers now have a list of traditional and trusted vendors, such as Microsoft and IBM, that offer competing products and may take market share based on relationships and security concerns.

Google Apps will benefit from narrowing its strategic focus to the social enterprise, but faces stark competition from Microsoft and IBM in 2012

SOURCE: TBR

Social Media

Sharing and Collaboration

OnDemand Access

Social Enterprise

Google: TBR’s Cloud Vendor Reports

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.22

TBR Assessment of Google’s two-year strategic outlookKey TakeawaysFinancial: Google is experiencing high adoption of its cloud products, but the products’ low price points drag revenue and profitability below competitors such as Microsoft and IBM.Go to Market: Google leverages brand recognition and its massive web presence to reach the market, but will rely more heavily on partners to drive sales, especially into large accounts.Resource: Google is building datacenters across APAC to drive revenue from the quickly growing region.

Strategic Outlook• Google is top of mind for customers thanks to its

widespread search and personal usage, and will continue to successfully penetrate the business world through Google Apps and Google App Engine.

• The Apps business will continue driving the majority of revenue from SMBs and the midmarket through 2012; however, in 2H12, revenue from large enterprises will begin to increase as Google’s improved reseller program targeting large accounts gains traction.

• Google App Engine will begin to drive increased revenue in 2H12 as developer platforms become increasingly important for customers to build and customize apps. With vendor integration rising, App Engine will enable more vendors to sell through Google, increasing revenue on all fronts.

• Google+ will drive Google’s social enterprise. It may be more useful inside organizations (for projects, teams and videoconferencing) than as a “Facebook-killer,” as companies may not see value in another social media site if they already use vendors such as Facebook and LinkedIn. Familiarity with Google is higher than familiarity with Salesforce.com, giving Google+ Pages an advantage over Chatter with customers taking early steps into the social enterprise trend.

Google has stopped relying solely on its brand, and will increase adoption in 2012 by improving its reseller program and adding value to its portfolio

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Google Cloud Revenue Operating Income

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SOURCE: TBR AND GOOGLE

Google: TBR’s Cloud Vendor Reports

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.23

TBR Assessment Corporate Strategic ObjectivesRather than re-inventing itself through cloud, Microsoft is capturing success in the cloud market by repackaging its solutions to gain cloud customers and revenue. The company is in the early stages of its cloud strategy, and its cloud platform offerings are comprised primarily of core products, including Hyper-V, SQL Server and System Center. By leveraging existing offerings, Microsoft ensures a seamless transition for customers upgrading to cloud-based IT, as well as established routes to market to target new customers adopting Microsoft cloud solutions. This foundation of offerings and routes to market will ensure long-term success as Microsoft’s cloud business moves beyond the growth stage toward maturity.

Support hybrid cloud adoption by integrating public and private cloud strategies with System Center 2012 hub

Microsoft is integrating its public and private cloud strategies to support movement between the platforms. With the launch of System Center 2012 in mid-2012, the company will enable hybrid cloud deployment and drive revenue across both public and private cloud portfolios.

Leverage partnerships to drive cloud adoption in the SMB market

Partnerships provide Microsoft routes to market and increase the addressable customer base for cloud solutions. To help drive adoption and compete with Google in the SMB market, Microsoft partnered with MasterCard in 4Q11 to offer a 10% discount to MasterCard customers.

Expand geographic presence of cloud business solutionsMicrosoft is expanding its cloud presence globally, deploying cloud solutions in regions with rapid IT adoption. In addition to feature updates to Office 365 in 4Q11, Microsoft made the cloud productivity solution available in 22 additional markets – notably Argentina, South Africa and Taiwan.

Microsoft will leverage established offerings to write the next chapter of its software saga in the cloud

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MICROSOFT CLOUD REVENUE AND YEAR-TO-YEAR GROWTH

Microsoft Cloud Revenue Microsoft Cloud Growth Year-To-Year

*Microsoft Enterprise Cloud Revenue SOURCE: TBR ESTIMATES AND MICROSOFT

TBR

Microsoft: TBR’s Cloud Vendor Reports

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.24

RevenuesMicrosoft is driving cloud revenue through partnerships and integrating solutions to tailor cloud solutions to customer needs. In 4Q11 Microsoft announced a partnership with MasterCard to increase adoption by SMB customers by providing pricing discounts to MasterCard small business merchants and account holders. With the anticipated launch of System Center 2012 in mid-2012, Microsoft will benefit from an integrated public and private cloud portfolio, promoting hybrid environments to drive revenue across each portfolio.ExpensesTBR believes up-front development and deployment costs represent the majority of Microsoft’s cloud expenses. S&M and R&D spending to develop and bring to market solutions, including Office 365 and System Center 2012, continues to cut into the profitability of Microsoft’s cloud business. MarginsUp-front costs will begin to level out as the cloud portfolio matures, resulting in higher margins in Microsoft’s cloud business. TBR estimates Microsoft’s total cloud operating margin was approximately 16.5% in 4Q11. The Server and Tools, Windows and Business divisions, three of Microsoft’s highest-margin business, provide the majority of the functionality for the company’s cloud strategy and account for its above-average cloud margin.

Microsoft will continue to leverage partners and its systems management capabilities to drive cloud revenue

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MICROSOFT CLOUD REVENUE AND OPERATING INCOME

Microsoft Cloud Revenue Microsoft Cloud Operating Income

SOURCE: TBR ESTIMATES AND MICROSOFT

TBR

Microsoft: TBR’s Cloud Vendor Reports

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ESTIMATED MICROSOFT CLOUD SEGMENT REVENUE

Public Cloud Revenue Private Cloud Revenue

TBR

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TECHNOLOGY BUSINESS RESEARCH, INC.

Cloud Computing Adoption StudyFebruary, 2012

PROPRIETARY WORK: FOR CLIENT

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Technology Business Research Cloud Portfolio – Discussion Document ©2012 Technology Business Research, Inc.26

Cloud Computing Adoption Study: Table of Contents

Study Overview Workloads on Public Cloud (cont.)5 Methodology 33 Overall Roadmap to Cloud

ServicesPublic Cloud SegmentsPublic Software as a Service

37 Key Findings

Executive Summary7 TBR Position8 Adoption of Public Cloud Services11 Key Findings12 Adoption of Public Software as a Service14 Adoption of Public Infrastructure as a Service16 Adoption of Public Platform as a Service18 Adoption of Public Security as a Service

39 Offerings Purchased40 Offerings Considered41 Key Vendors44 Post-Purchase Satisfaction

Public Infrastructure as a Service46 Key Findings48 Offerings Purchased49 Offerings Considered50 Key Vendors51 Post-Purchase Satisfaction

Public Platform as a Service53 Key Findings55 Offerings Purchased56 Offerings Considered

Public Cloud Adoption Drivers and Barriers22 Key Findings24 Drivers to Public Cloud Adoption25 Drivers to Future Public Cloud Adoption26 Key Segments That Drive Cloud Adoption27 Business and IT Barriers

Workloads on Public Cloud30 Business Functions for Public Cloud32 Private Cloud Adoption

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Public Platform as a Service57 Key Vendors58 Post-Purchase Satisfaction

Public Security as a Service60 Key Findings62 Key Security Functions63 Key Vendors64 Post-Purchase Satisfaction

Appendix67 Supplemental Material – Cloud Adoption74 Supplemental Material – Purchasing Assessment89 Supplemental Material – Public Software as a Service97 Supplemental Material – Public Infrastructure as a Service104 Supplemental Material – Public Platform as a Service111 Supplemental Material – Public Security as a Service115 Demographics

Cloud Computing Adoption Study: Table of Contents

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TBR surveyed 302 IT purchasers across three business segments to understand the public cloud purchasing landscape in the United States

SOURCE: TBR WINTER 2011, CLOUD COMPUTING ADOPTION STUDY; TOTAL N= 1,496, N=302 FOR PUBLIC CLOUD ADOPTERS

TBR conducted 1,496 online surveys with IT decision-makers working at firms based in the United States who are responsible for or who influence public cloud services purchasing.

302 respondents indicated that they had adopted public cloud.

Sample: 100 - Small business (10-99) surveys101 - Midmarket (100-999)surveys101 - Large business (1000+) surveys

Survey Dates: December 2, 2011 – January 2, 2012

Respondents: Total Respondents – 1,496Public Cloud adopters – 302

Methodology

Cloud Computing Adoption Study: Methodology

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Nearly three in four businesses are either using or planning to purchase public cloud

Drivers and Barriers are varied – but cost reduction and security remain on top

Customers want to shift more sophisticated workloads to the cloud

To capitalize on the vast public cloud opportunity, vendors must address security concerns and provide clear business benefits to customers

Public Cloud Market Summary

SOURCE: TBR WINTER 2011, CLOUD COMPUTING ADOPTION STUDY; TOTAL N= 1,496

Cloud Computing Adoption Study: TBR Position

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Three of four IT buyers want public cloud services and Software as a Service is the leading public cloud segment

Adoption remains on the upswing.

Market opportunity is growing

Buyers are considering multiple vendors

Dominant vendors have not emerged

Applications lead adoption

Buyers are looking for solutions

Software and Infrastructure as a Service lead

Vendors must get past security issues

of businesses either use or plan to purchase a public cloud service in 6 months

of non-adopters plan to purchase a SaaS application within 6 months

74%

50%

SOURCE: TBR WINTER 2011, CLOUD COMPUTING ADOPTION STUDY; TOTAL N= 1,496

Public Cloud Adoption

Cloud Computing Adoption Study

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Cloud adoption is near 40% - with public cloud adoption at 20% and 54% intending to add public cloud

• Of the 1,496 respondents who participated in the study, 39% have adopted cloud computing.

• 54% of respondents intend to add public cloud services within 12 months.SOURCE: TBR WINTER 2011, CLOUD COMPUTING ADOPTION STUDY; TOTAL N= 1,496

N= 1,496 IT Decision makers and

Line of Business

Managers in U.S

Overall Cloud adoption rate =

39%

Public Cloud adoption rate =

20%

FIGURE 1.0

Overall Cloud Adoption Rates

Considering Public Cloud = 54%

Cloud Computing Adoption Study

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Not only is overall adoption increasing, but cross-cloud adoption is increasing for applications, platforms and infrastructureAdoption Rates for Public Cloud

20% of the respondents have adopted public cloud and 54% are considering adoption of public cloud computing services. SaaS leads the cloud segments with an adoption rate of 69% among cloud users.

SOURCE: TBR WINTER 2011, CLOUD COMPUTING ADOPTION STUDY; TOTAL N= 1,496, N=302 FOR PUBLIC CLOUD ADOPTERS

54%

26%

20%

N=1,496

Adopted Public Cloud

Not Considering Public Cloud

Considering Public Cloud

Cloud Segment

SaaS69%

N=302 for public cloud adoptersN=302 for public cloud adopters

FIGURE 1.1

FIGURE 1.2

Adoption of Private Cloud among Public Cloud users

IaaS53%

PaaS50%

SECaaS22%

Cloud Computing Adoption Study

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Key Findings Conclusions and Implications

• The public cloud adoption rate is 20%, but it is growing at a rapid 40% year-to-year according to TBR research. The majority of adoption comes from SaaS, though each type of cloud segment is progressing at a different rate .

• Over 50% of respondents indicated cost savings as their primary purchase driver.

• Public cloud adoption is rapidly growing across business segments and the “gold rush” will continue as customers realize value through cost savings, scalability, integration and portability.

• Though majority of customers expect modest savings between 10% - 29%, they complained about lower cost savings than expected, opening up opportunities for low-cost vendors to capitalize on.

Data security and privacy are top concerns for both public cloud adopters and non-adopters among other concerns such as unclear ROI and legacy infrastructure .

• Those vendors that can quantify cloud computing benefits, map workloads to deployment options while alleviating customers’ security-related concerns to create a trustworthy cloud will accelerate adoption within lagging segments.

SaaS is the most popular segment and is growing across multiple applications, while SECaaS saw the lowest adoption rate. However, as security is a top concern, TBR believes SECaaS will begin to see rapid adoption as public cloud moves from a nice-to-have to core workloads and functions.

TBR believes there is a large revenue opportunity for security vendors as it remains an overarching concern. Trusted security vendors, Symantec, McAfee and Trend Micro will continue as leaders in this space as customers flock to proven security solutions over newer-to-market pure cloud plays.

Adoption Rates & Drivers

Barriers

Key Solution Segments

Key Findings and Conclusions

While SaaS, the leading public cloud segment, dominates adoption, all segments will see increased future growth as cloud becomes the norm

SOURCE: TBR WINTER 2011, CLOUD COMPUTING ADOPTION STUDY; TOTAL N= 1,496, N=302 FOR PUBLIC CLOUD ADOPTERS

Cloud Computing Adoption Study

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For additional information please contact:

Stuart Williams ([email protected]), Director – TBR Software Practice

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About TBR

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